The rule in Re Hastings-Bass,  Ch. 25 (CA), has been understood to permit the court to declare void and set aside the exercise of a discretionary power under a trust, either because the trustees considered factors they ought not to have considered or because they failed to consider factors they ought to have considered. The typical case concerns unforeseen tax consequences. As Lloyd LJ points out in the combined appeals in Pitt v Holt and Futter v Futter,  EWCA Civ 197, Hastings-Bass did not turn on the this sort of fact pattern and the ratio of the case is actually much narrower than the rule that subsequently developed.
Lord Justice Lloyd, in the Court of Appeal, held that cases in which the acts of trustees are found to be void should be kept to a minimum. In his judgment, 'the principled and correct approach to these cases is, first, that the trustees’ act is not void, but that it may be voidable. It will be voidable if, and only if, it can be shown to have been done in breach of fiduciary duty on the part of the trustees. If it is voidable, then it may be capable of being set aside at the suit of a beneficiary, but this would be subject to equitable defences and to the court’s discretion. The trustees’ duty to take relevant matters into account is a fiduciary duty, so an act done as a result of a breach of that duty is voidable [not void]'. In effect, a kind of business judgment rule for trustees, under which trustees may fulfil their duties by seeking professional advice -- even if that advice turns later out to be incorrect. In both appeals, there was no breach of fiduciary duty because there was entirely proper reliance on professional tax advice, even if that advice was misunderstood and misapplied by the fiduciary.
The appellants in Pitt also sought to set aside the transactions on the grounds of mistake. Lloyd LJ held that relief for mistake is confined to narrow circumstances: 'a mistake on the part of the donor either as to the legal effect of the disposition or as to an existing fact which is basic to the transaction'. Unforeseen tax liabilities do not fit the bill, being a consequence but not the 'legal effect' of the transaction.
The UKSC has affirmed the Court of Appeal's approach to trustees' mistakes, holding that inadequate deliberation on the part of trustees must be 'sufficiently serious' as to amount to a breach of trust; it is not enough to say that the trustees did not meet the highest standards in their deliberations or that the court would have acted differently had it been in their shoes. Generally speaking, only a breach of fiduciary duty will justify the court's intervention -- for example where they breach their duty by exercising their discretion with inadequate deliberation. An exception to this general rule would be where honest and reasonable trustees reach an impasse. Good news for trustees there, but the test does seem rather subjective.
On mistake, the UKSC allowed the appeal. The 'true requirement' for the rescission of a voluntary disposition is 'a causative mistake of sufficient gravity', the gravity of being assessed by what Lord Walker called 'a close examination of the facts' (including tax consequences). The test will normally be satisfied only where there is a mistake as to the legal character or nature of a transaction; mere ignorance, inadvertence or misprediction won't do. The court must ultimately evaluate whether it would be unconscionable or unjust to leave the mistake uncorrected, based on the particular facts. On the Pitt facts, an incorrect conscious belief or tacit assumption about the tax consequences of the disposition was sufficient to give rise to relief. Nice for Mrs Pitt, the claimant, but here again isn't the test for rescission a subjective one?